Scottrade Inc. and Russell Investments are both exiting the exchange-traded-fund business.
Scottrade on Tuesday — less than a week after naming a new chief executive —announced that it will liquidate its lineup of exchange-traded funds. The 15 FocusShares ETFs, which have approximately $100 million in assets, will cease trading Aug. 17, according to a press release.
Scottrade replaced founding CEO Erik Liik effective July 30. Scott Golde, an associate general counsel at the firm, was named his replacement. Jack Naudi, spokesman, declined to say whether Mr. Golde had been brought in specifically to close the ETFs.
Scottrade attempted to capitalize on investor's infatuation with low-cost funds by offering the lowest-cost ETFs; but despite undercutting The Vanguard Group Inc., an investor favorite, by 1 or 2 basis points on several core equity ETFs, the funds never really caught on.
The board of directors for the FocusShares ETFs cited the inability of the ETFs to attract “significant market interest” and the lack of future viability as the reasons for the liquidation, according to a released statement.
Meanwhile, Russell Investments released a statement on its website late Monday announcing that it had undertaken a “strategic review” of its ETF business. A Bloomberg report added that Russell will be cutting approximately 30 jobs in New York and San Francisco as a result.
Rather than try to compete on cost in the crowded area of core equity or bond products, Russell focused on what it called “second generation” ETFs. The ETFs, such as the Russell Growth at a Reasonable Price ETF (ticker: GRPC), attempted to replicate popular investment strategies passively.
Steve Claiborne, spokesman for Russell, declined to comment beyond the announcement.